“As most of our raw materials are imported, the freight charge hike will increase the import cost. The export cost will also be raised for the same reason,” explained Nasir Uddin Chowdhury, Chairman of the standing committee on port and shipping of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) even as BGMEA First Vice-President MA Salam underlined that impact on the export costs will be felt in the next season when buyers will have to adjust the additional freight charges with the prices of their next order.
There seem to be no end to garment makers’ worries in Bangladesh these days! Ever since the Coronavirus pandemic hit the industry, apparel exporters — who have already been battling on numerous fronts including that of increased production cost, falling margins, etc. — are now forced to deal with all new challenges and each one with far-reaching devastating consequences. Order cancellations, request for discounts, falling order volumes, the list just goes on and on. And now to add to the woes, freight charges have risen sharply, which is impacting the readymade garment sector significantly, industry insiders claimed.
To start with, feeder vessel operators to and from Chittagong Port and the hubs of Colombo, Singapore and Port Klang have reportedly decided to levy emergency cost recovery surcharges (ECRS) on outbound and inbound shipments to Bangladesh, a move which comes amid acute congestion at the hubs, linked to pandemic-related reduced numbers of port workers.
If reports are to be believed, not long ago, feeder vessels calling at Colombo have had to wait for up to five days and, in Singapore, more than two days to get a berth. This created uncertainty for feeder containers to get onboard their mother vessels, according to stakeholders, with two feeder vessel operators reportedly announcing an ECRS to recover extra costs due to the congestion by now already.
Singapore-headquartered Far Shipping Lines is said to have informed the customers its decision to levy additional US $ 75 for each laden container and US $ 37.50 for each empty box, effective 15 November, applicable to and from Chittagong and Colombo. “There have been reduced productivity and severe congestion, causing hardship to all operators,” it said, adding, “Accordingly, we have no option but to introduce an emergency cost recovery surcharge.”
Subsequently, Transworld Feeders too announced it would apply an ECRS, at the same level, effective from 16 November on its Chittagong-Colombo-Chittagong route, and a US $ 70 per laden container and US $ 35 per empty box charge on its Chittagong-Singapore-Port Klang route effective from 20 November. “We have been encountering unprecedented delays in Colombo, which have resulted in severe delays to our vessels with port stays exceeding seven days in certain cases, resulting in port call omissions and route changes at short notice,” it underlined.
Maersk, too has confirmed that severe delays had been seen across Colombo’s container terminals. “SAGT Terminal has been facing severe labour shortage issues which impacted operations. These have resumed with low productivity.” It added that inter-terminal transfers to SAGT had also been delayed, further stating that “CICT Terminal is currently operating with an average labour availability of more than 90 per cent. However, JCT, the Government terminal, has labour availability of less than 70 per cent.”
According to reports, around 44 per cent Bangladeshi goods are transhipped through Singapore, 37 per cent through Colombo, 12 per cent through Tanjung Pelepas and the remaining 7 per cent through Port Klang.
“Any additional charge ultimately creates pressure on shippers or consignees affecting trade,” said an official of a main line operator in Dhaka while Chairman of the Bangladesh Shipping Agents Association, Ahsanul Hoq Chowdhury on his part maintained that the congestion at several ports is causing a pile-up of containers, and this has led to additional operating costs for vessels, forcing shipping lines to increase the freight rates.
“The sudden and sharp increase in freight charges in the last one month or so due to the adverse effects of COVID-19 on the global shipping sector that have witnessed all major mainline operators increasing freight rates citing acute shortage of empty containers following a surge in demand for imports, have pushed cost for importers and exporters,” said industry people adding besides, the ongoing Coronavirus pandemic has disrupted the global supply chain, causing delays in shipment and congestion at several ports.
Further, CMA-CGM, the fourth largest container shipping line in the world, has recently announced that it would implement new freight charges for the routes between base ports in Northern Europe and the Indian subcontinent, which will come into effect on 1 January.
Not a very good way to kick off the new year for garment exporters in Bangladesh, one would acknowledge without a doubt.
The CMA-CGM reportedly informed its customers that it would not take bookings for cargoes bound for ports in southern China for several weeks in early 2021 due to the suspension of feeder services, which has the industry at its wits’ ends.
The impact on the export costs will be felt in the next season when buyers will have to adjust the additional freight charges with the prices of their next order, said BGMEA First Vice-President MA Salam, who criticised the rising trend of freight charges and went on to add that it’s not only the shipping industry but every business and sector have had to deal with the fallouts of the Coronavirus pandemic.
So, the shipping industry should not have arbitrarily raised the freight rate to recover their losses at the expense of other sectors, complained MA Salam.
Thus, even as the apparel exporters continue to find ways to deal with this challenge, the apex garment makers’ body, the BGMEA has reportedly asked all its members to provide information on additional charged levied by the shipping lines.
The BGMEA has asked its members to inform the trade body about realisation of additional charges by freight forwarders and shipping lines on import and export consignments as apparel exporters alleged that freight forwarders and shipping lines had been charging additional money on import and export consignments at the Chittagong port in violation of the instructions of the National Board of Revenue (NBR) and the port authorities.
The BGMEA on 13 December issued a circular asking its members to provide documents of additional charges realised so that the trade body could take effective measures with the support of the NBR and port authorities to put a stop to the imposition of any unauthorised charges. The circular said that, as per the direction of the NBR and port authorities, no charges were applicable for import consignments of readymade garment companies shipped under freight prepaid and export consignments shipped under the Free on Board or Free Carrier (FCA).
Earlier, the BGMEA while claiming that feeder vessel operators had increased the rent for containers arriving at and leaving Chittagong Port in the name of emergency cost recovery surcharge which would impact export competitiveness badly, wrote a letter to the Chittagong Port Authority on 19 November terming the ECRS illogical and unacceptable and demanded the withdrawal of the surcharge.
The letter claimed, effective 15 November, feeder vessel operators working on the Chittagong-Colombo-Singapore and Port Klang routes had imposed US $ 75 on each goods-laden container and US $ 37.50 on each empty one.
Now, if the intervention by the BGMEA or any further actions by the NBR or the port authorities would change the existing scenario is yet to be seen. But until then garment exporters would have to continue shelling out extra bucks from their pockets for shipping goods it seems.